What is Margin trading?
Cryptocurrency margin trading is the process of buying and selling digital coins using leveraged funds from an exchange. This trade allows traders to increase their potential profits and manage their risks, but it can also increase the level of risk, as borrowed funds must be returned, even if in the event of a losing trade.
In margin trading, traders borrow a certain amount of cryptocurrency to increase their trading volume. The exchange issues borrowed funds at a certain percentage, which the trader compensates from the security deposit.
Margin trading can be useful for traders to get additional profits. But at the same time, it is necessary to understand that trading on margin involves high risks and requires good preparation and a risk management strategy
1. Markets and trading assets
Margin traders place orders to buy or sell cryptocurrencies in the spot market. This means that margin orders are matched against orders in the spot markets. All orders related to margin trading are actually spot.
When trading futures, traders place orders to buy or sell contracts in the derivatives market.
Thus, margin and futures trading are two different markets.
2. Leverage
Margin traders have access to 10x leverage on the assets provided by the platform.
3. Trading commissions
Margin allows users to borrow funds on the platform and calculates the interest rate on the loan. Subsequently, users return the borrowed funds. Traders should pay attention to the sufficiency of assets in order to avoid liquidation.
Users will have to pay trading fees on the margin platform. Margin trading commission equals spot